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Corporate Matters

A quarterly newsletter from our Corporate team keeping you informed of the latest legal news and developments.

Latest Issue

In the latest issue of Corporate Matters our tax expert Mark Whiteside looks at the key tax changes for businesses from the Autumn Statement.

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Fourth Money Laundering Directive and the PSC regime – what changes to expect

Friday 26th May 2017

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We previously wrote about the changes to PSC reporting requirements that were expected because of the UK Government’s commitment to implementing the EU Fourth Money Laundering Directive (Fourth Directive). The Fourth Directive needs to be transposed into UK law by 27 June 2017. With this deadline fast approaching Companies House recently published a press release detailing the additional anti-money laundering measures which will come into force on 26 June 2017.  

Different corporate bodies

The additional anti-money laundering measures include changes to the current PSC regime. The scope for those that must report under the PSC regime will widen to include more entities. Companies that have traded on the EEA or Schedule 1 specified market are still exempt. As mentioned in our last article companies trading on the prescribed markets such as AIM and ISDX may no longer benefit from exemption and may be required to disclose their PSCs as the exemptions have changed. How these exemptions have changed has not been confirmed by Companies House.

Scottish Limited Partnerships (SLPs) will be required to register their PSC information with Companies House from 24 July 2017. SLPs like other entities under the PSC regime will be required to confirm their details are correct annually. General Scottish Partnerships (SPs) where all the members are corporate bodies will also be required to update their PSC information with Companies House from 24 July 2017. SLPs and SPs will also have available to them the protection regime. This will enable them to apply for restrictions so that certain information is not disclosed to the public register.

Filing requirements

Confirmation statements will no longer be used to update a company’s confirmation statement. Companies House forms PSC01 to PSC09 will need to be used instead. Companies will be required to update their PSC register within 14 days of the change. Companies will have an additional 14 days to update Companies House with these changes.

The timeframe for updating PSC information and Companies House is considerably shorter than what the Fourth Directive requires. The Fourth Directive requires companies to update their PSC information within six months of it changing. This variation from the Fourth Directive is likely to have been chosen so that it is in line with current Companies House filing deadlines and to also encourage good housekeeping.

Protection regime

Currently only specified public authorities can access restricted information under the protection regime. The Fourth Directive extends this right to credit and financial institutions. Companies House will make protected information available to credit and financial institutions where appropriate as these institutions already carry out customer due diligence.

There are still some changes that Companies House needs to clarify. What is clear is that the Fourth Directive has widen the scope of the PSC regime.

Further reading: ‘PSC reporting requirements - more changes to come’ and our full overview of the PSC regime which we published in April, ‘Persons with Significant Control - an overview of the new regime’

If you would like more information on the topic, please do not hesitate to get in touch with your usual contact within the Corporate team or contact:

Paralegal, Corporate
Tel: 0151 600 3066


PSC reporting requirements - more changes to come

Tuesday 29th November 2016

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The introduction of the People with Significant Control (PSC) register under the Small Business, Enterprise & Employment Act 2015 (SBEE) demonstrated the UK Government’s commitment to promoting corporate transparency. This commitment continues with the implementation of the EU Fourth Money Laundering Directive (Fourth Directive). This directive will add to the PSC reporting requirements that companies are already subject to under SBEE.
Frequency of filings
The Fourth Directive requires the beneficial ownership information held centrally to be ‘adequate, accurate and current.’ Whilst current legislation ensures that information held about PSCs is adequate and accurate, filing confirmation statements annually does not ensure that PSC information is current. Companies can elect to file numerous confirmation statements to reflect changes to their PSCs but there is no legal requirement to do so. Under the Fourth Directive companies will be required to update their PSC information within six months of it changing. 
HM Treasury’s consultative paper on Fourth Directive implementation suggests that private companies can combat the increased administrative burden, by electing to keep their PSC register centrally with Companies House. This mechanism was introduced under SBEE. Any changes made to the company’s statutory register would be made directly to Companies House. 
Widened scope
The Fourth Directive also widens the scope of the legal entities that are required to disclose who their beneficial owners are. The following entities are now required to disclose who their PSCs are:
  • European Cooperative Society (SCE);
  • Scottish Partnerships and Scottish Limited Companies;
  • Scottish Partnership;
  • Unregistered Companies. This includes some Royal Chartered bodies. 
Companies trading on the prescribed markets such as AIM and ISDX may no longer benefit from exemption requirement and could be required to disclosure their PSCs.  
The Fourth Directive will require companies to assess whether they are able to adhere to the increased frequency of filings. Whilst the burden of holding the statutory register can be pushed to Companies House the obligation of ensuring this information is accurate will remain with companies. 
Further reading: You can read our overview about the PSC regime which we published in April by following this link
If you would like more information about the PSC reporting regime please do not hesitate to get in touch with your usual contact within the Corporate team or contact:
Partner, Corporate
Tel: 0151 600 3106
Paralegal, Corporate
Tel: 0151 600 3066


Autumn Statement 2016: A look at the key tax changes for businesses

Thursday 24th November 2016

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Corporate Matters - Issue 15

The Autumn Statement is the Chancellor of the Exchequer’s first major fiscal event since the “Brexit” referendum earlier this year. From next year, the Autumn Statement will become the new single annual Budget, announcing tax changes well in advance of the start of the following tax year. There will be a new “Spring Statement” from 2018, however it will not include any tax or policy changes.

The Chancellor confirmed a number of earlier government announcements in relation to tax, particularly those announced at the 2016 Budget, and there were relatively few surprises.

Some of the key announcements include:

  • Following consultation, the tax and NIC advantages of certain Salary Sacrifice arrangements will be abolished from April 2017. However, arrangements involving pensions, childcare, Cycle to Work and low-emission cars will continue to benefit from tax and NIC advantages. Salary Sacrifice arrangements in place before April 2017 will be protected until April 2018 (and arrangements in relation to cars, accommodation and school fees will be protected until 2021).
  • The tax advantages linked to Employee Shareholder Status (ESS) shares will be abolished from 1 December 2016. Given that ESS rules require employees to be provided with at least 7 days’ notice to consider such arrangements, the abolition of ESS is effective immediately (save for those arrangements where the employee consultation process is already underway).
  • The government will introduce a new 16.5% VAT flat rate scheme from 1 April 2017 for businesses with limited costs (such as “labour-only” businesses). The move is intended to counter “aggressive abuse” of the existing flat rate scheme. Anti-forestalling rules will also apply.
  • Following consultation, “off-payroll” working in the public sector will be reformed from April 2017 by moving the compliance responsibility to the public sector body that is paying the worker’s company.
  • The government has announced a wide-ranging consultation on different forms of “worker” remuneration. This will look at different working arrangements, as well as the taxation of benefits in kind and expenses.
  • Following consultation, the government has announced that with effect from April 2017 the existing “substantial shareholding exemption” (SSE) rules will be reformed to simplify and extend the exemption.
  • The standard rate of insurance premium tax (IPT) will increase to 12% from 1 June 2017.
  • Following consultation the tax deductibility of interest payments, and tax relief for carried forward losses, will both be restricted with effect from April 2017. Both of these changes will only impact larger business and corporate groups.

If you like to discuss any specific issues relating to the Autumn Statement or for any other corporate matter please contact us.

Partner, Corporate
Tel: 0151 600 3269

Spotlight on the Northern Powerhouse Investment Fund: Bridging the Funding Gap

Wednesday 23rd November 2016

The British Business Bank has released a new report shining a spotlight on the new Northern Powerhouse Investment Fund, which provides a welcome confirmation of the Government’s commitment to supporting small and medium enterprises (SMEs) in the north.

The Northern Powerhouse Investment Fund is a £400 million fund, being established to support SMEs across the Northern Powerhouse region.  The new fund is a successor to the previous North West Fund and aims to build on the work of this and other publicly backed venture capital funds.

Previous publicly backed venture funds in the north have been criticised for overly ridged rules and criteria (such as prohibitions on acquisitions and buyout transactions). Such rules previously deterred numerous SMEs from applying for funding, limiting the impact of previous venture funds ability to increase available funding and growth in the region. The new report on the Northern Powerhouse Investment Fund gives no indication as to the rules and criteria to be applied to this new fund. We hope that the new fund will be able to take a more flexible approach than its predecessors, in order to maximise the impact of the fund and the opportunities for SMEs.

The new report confirms that the Northern Powerhouse Investment Fund aims to be operational by early 2017, providing funding to SMEs in three strands:

  • Micro finance:  providing debt finance of £25,000 to £100,000.
  • Debt finance:  providing debt finance of £100,000 to £750,000.
  • Equity finance:  providing equity finance from £50,000 to £2 million.

The targeting of the new fund reflects that the sub-£2 million funding market has traditionally been one of the most difficult for SMEs. However, recent changes to Venture Capital Trust (VCT) rules (prohibiting the use of VCT money for management buyouts and corporate acquisitions) have led a number of private equity houses to refocus on this funding market, moving away from the £2 to £10 million buyout market (limiting the funding available in this space). It remains to be seen whether the Northern Powerhouse Investment Fund will be able to successful work in conjunction with regional private equity houses, to unlock a wider array of deals for SMEs.

One of the key objectives of the new fund (particularly through the micro finance stream) is to assist micro businesses in obtaining access to funding.  The report identifies that 50% of micro businesses in the north (being those with one to nine employees) having reported difficulty in obtaining finance, with 35% being unable to obtain any finance at all.  It is hoped that the micro finance packages to be offered by the new fund will provide important support to micro businesses, helping them to grow to a point where they become attractive to high street banks and other mainstream funders.

Another key objective of the fund is to address the gap in equity funding available to companies in the north compared to those in London and the south east.  The report identifies that, while the north accounts for 20% of the UK’s business population, the region attracts only 15% of the equity investments made in Britain (accounting for just 7% of the total value of equity funds invested).  The report further identifies that the level of equity investment in the north has remained fairly static since 2013, whereas London and the south east have experienced a rapid growth of available funding in this area. Moreover, within the north equity investments have largely been focused in Manchester and Leeds, with SMEs in the surrounding areas accounting for only a small proportion of the total equity deals. If the new fund is to truly succeed in opening up access to equity finance across the north, more will need to be done to promote access to equity finance outside of these traditional hubs. An element of education for SMEs located outside of these hubs on the potential benefits of equity finance will be key to achieving this objective.

The report recognises that equity funding is an important source of finance for early stage and high growth companies.  This view is supported by a recent report commissioned by the BVCA, which shows that private equity backed companies tended to be up to 9% more productive than comparable businesses (showing that equity finance has an important part to play bridging the traditional productivity gap between north and south).  The BVCA report also further underlines the opportunity for the growth of equity funding in the north, identifying that 35% of the companies which fit the ideal statistical profile for equity investments are located in the region.

To help address the lack of access to equity finance for SMEs in the region, the new Northern Powerhouse Investment Fund will be committing 40% of its funding to providing equity finance for early stage high growth companies. The sub-£5 million development capital funding market has continued to be challenging for SMEs. It is hoped that the equity finance to be made available by the Northern Powerhouse Investment Fund will now provide SMEs with access to the necessary development capital to support their growth plans.


The British Business Bank “Spotlight: the Northern Powerhouse Investment Fund” report is available here.

BVCA commentary on the “Engines of growth: private equity and productivity potential in the North” report can be found here

If you would like to discuss any matters relating to corporate funding or for any other corporate issues please contact us.

Daniel Hayhurst

Solicitor, Corporate
Tel: 0151 600 3155



Predictions for the 2016 Autumn Statement

Thursday 17th November 2016

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Corporate Matters - Issue 14

The 2016 Autumn Statement is set to be announced on the afternoon of Wednesday 23 November by Philip Hammond.

In advance of this we have set out below a brief summary of some of the measures which may be included.

Given the wider political and economic climate it is not expected that significant or wholesale policy changes will be announced, at least from a tax perspective, but there are likely to be a number of updates on important ongoing tax consultations.

As usual there will almost certainly be announcements in relation to tax evasion, and further moves towards modernising tax compliance and administration.

  • Corporation Tax (Loss Relief)

A summary of responses to the consultation on reforms to corporation tax loss relief may be included in the Autumn Statement, as well as draft legislation.

  • Review of Substantial Shareholding Exemption (SSE)

The last date for comments on the consultation relating to reform of the substantial shareholdings exemption (SSE) was 18 August 2016. UK corporates have benefitted from SSE for some time, however it has long been considered an area for simplification. The current rules could also be extended, to make the UK a more attractive location for holding companies and to encourage inward investment. There is a possibility that draft legislation dealing with reform in this area could be announced in the Autumn Statement.

  • R&D Tax Credits

The R&D tax relief voluntary advance assurance scheme for SMEs was launched in November 2015 with a view to improving access to tax credits for small businesses.  There is a possibility that the Autumn Statement could provide an update on this, specifically in relation to plans to extend the voluntary assurance service to larger companies.

  • Entrepreneurs’ Relief for academics

Commentators anticipate a consultation to be announced in this area following the March 2015 Budget where it was confirmed that the government intended to review the application of Entrepreneurs’ Relief for academics who dispose of their shares in companies that are used to exploit intellectual property that they have contributed to.

  • Partnership Taxation

Following a consultation with respect to changes to partnership taxation which closed on 1 November 2016, it is hoped that the Autumn Statement will contain a summary of responses to that consultation, and even some draft legislation.  The consultation included proposals to deal with areas of partnership taxation which were considered unclear under the current rules, to include increased reporting to HMRC and potential legislation in relation to partnership profits.

  • Venture Capital Schemes

It is likely that that the Autumn Statement will provide an update and further details of the proposed online assurance process which was anticipated to begin at the end of 2016.  There is also a possibility that draft secondary legislation relating to replacement capital in the Enterprise Investment Scheme and the Venture Capital Trusts Scheme will be announced.

It is unlikely that there will be no reference to Brexit in the statement! We hope instead that there will be specific mention of whether the government anticipates any tax changes, other than those set out above, as a result of the June referendum, specifically in relation to corporation tax moving forward.

We will be reporting again once the Autumn Statement has been released on any noteworthy changes.

If you would like to discuss any matters related to the points above or for any other corporate or tax matter please do not hesitate to contact us.

Jayne Croft

Solicitor, Corporate
Tel: 0151 600 3012


Partner, Corporate
Tel: 0151 600 3269

Cutting through the complexity of restrictive covenants

Thursday 17th November 2016

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Corporate Matters - Issue 14

When examining a restrictive covenant in an employee-employer context, Tribunals have been quick to ascertain the reasonableness of the terms and to check that they go no further than is necessary in order to protect a legitimate interest.

By contrast, the Courts have long been reluctant to apply such an interventionalist approach when construing restrictive covenants contained within a share purchase agreement (“SPA”) and have instead treated the parties as equal partners deserving of no additional protection.  For example restrictive covenants of eight years in duration have been found, on the facts, to be legally acceptable.

A recent High Court decision (Rush Hair Ltd v Gibson-Forbes & Anor) has, however, demonstrated that the Courts will depart from their usual hands off approach when the wording of an SPA’s restrictive covenants was so ambiguous that it allowed for a more expansive interpretation.

The Rush Hair Case, concerned the sale of a salon company, under which the seller entered into a covenant with the buyer not to:

  • any time during the period of two years from completion, canvass, solicit, entice or employ...[JT]…[LH]…[or]…[CH]

After fourteen months the seller had incorporated a new company and opened two new salons. The seller then proceeded to directly employ LH and CH whilst engaging JT as a consultant.

As the seller was operating through a newly incorporated company, it was contended that there was no breach of the restrictive covenant. The buyer disagreed and issued proceedings.

The judge rejected the buyer’s first submission that there was an abuse of corporate legal personality because the seller had used the new company as a device to circumvent the restrictive covenant. The judge found that the seller had not committed a wrong by relying upon the limited liability of a company. To the contrary, that is what incorporation is all about.

Instead the judge concluded that there was sufficient ambiguity within the meaning of clause, so as to allow two interpretations. Either the seller could be prohibiting from doing specified acts only when acting on her own behalf or as prohibiting the doing of those acts whether on her own behalf or as agent for another.

The judge gave the clause a commercially sensible meaning and on the basis that the seller had always operated her salons through a limited company, it was reasonable to assume that from the outset, the parties envisaged that the seller would not breach the restrictive covenant by acting as an agent for another. 

The Rush Hair Case acts a warning to those sellers who may look to rely upon the ambiguity of a restrictive covenant to breach it. Instead, both sellers and buyers should carefully negotiate reasonable restrictive covenants that make it clear what can and cannot be done at the outset to avoid any expensive and protracted litigation. In particular, a well drafted clause will make it clear that operating through a company will not allow the seller to operate in contravention of the restrictive covenants.

If you require further information or advice concerning restrictive covenants, please contact:

Rupert Gill
Partner, Corporate
Tel: 0151 600 3106
Email Rupert



Trainee Solicitor
Tel: 0151 600 3146


Directors’ duties and responsibilities: Insolvent companies

Thursday 28th April 2016

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Corporate Matters - Issue 13

In this third and final edition in our series of articles on directors’ duties, we examine the duties owed by directors of insolvent companies. This follows on from our previous editions looking at “Shareholders in dispute” and “General duties owed by directors under the Companies Act 2006”.

Where a company is insolvent, the directors’ duty to act in the best interests of the company and its shareholders “flips” to a duty to act in the best interests of the company’s creditors. In particular, where a company is irredeemably insolvent, the directors must act to minimise the losses to the company’s creditors as a whole.

Wrongful trading and personal liability

While directors of a company will generally not be personally liable for their actions, directors of an insolvent company can incur personal liability if they engage in wrongful or fraudulent trading. Wrongful trading involves continuing to trade a company where there is no reasonable prospect of that company avoiding insolvent liquidation. Fraudulent trading involves carrying on the business of a company with the intent to defraud its creditors.

Directors of a company will have a defence to a claim of wrongful trading if they can show that they took every step they ought to in order to minimise the losses suffered by the company’s creditors. Further, the rights of a company will not be committing wrongful trading where they continue to trade the company while exploring options which have a reasonable prospect of allowing the company to successfully avoid insolvent liquidation. Directors should avoid substantially increasing the company’s net creditor position while they explore such options.

It has been common in the recent years for banks to seek personal guarantees from the directors. Directors should carefully consider whether they have given any such personal guarantees as part of any proposed refinancing plan.

General considerations

In an insolvent situation, directors of a company must avoid unfairly prejudicing one creditor, entering into transactions at undervalue or taking any action which would deprive the company of assets which could be solved by a future liquidator to satisfy the claims of the company’s creditors. Any of these actions could be reviewed and set aside by an administrator or liquidator of the company.

In order to minimise a director’s risk of personal liability in an insolvency situation, we will advise that directors follow the following key steps:

  1. Seek professional advice early, to demonstrate that any decision to continue to trade the company was reasonable and properly considered.
  2. Hold regular board meetings (and ensure that such meetings are properly minuted) to consider the financial position of the company.
  3. Carefully consider what funding or refinancing options are available to the company – if no options are available or if all options have been exhausted, it may be time to consider appointing an administrator or liquidator.
  4. Do not incur substantial further liabilities or credit for the company if it is uncertain that the company will be able to repay such credit or liabilities.

Need advice or wish to talk to us?

If you would like to discuss any matters raised here or covered in our the previous two articles on directors' duties and responsibilities please contact:

Daniel Hayhurst

Solicitor, Corporate
Tel: 0151 600 3155

UK Corporate Governance Code: A look at the Financial Reporting Council's progress report

Thursday 28th April 2016

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Corporate Matters - Issue 13

The Financial Reporting Council (FRC) published a progress report this year titled Developments in Corporate Governance and Stewardship 2015. According to the report, 90% of the FTSE 350 firms are now complying with nearly all of the provisions of the UK Corporate Governance Code (UKCG Code) which was introduced in 2014 in light of the global economic crisis.

The FRC says there has been a slight reduction in strict compliance with the Code since 2014 as a result of new entrants to the market, but that it has also led to improvements in the quality and quantity of engagement between investors and companies. It further reported that the quality of explanations on non-compliance have improved and it is expected that more companies will comply fully with the Code once the EU Audit Regulation (ARD) Directive is implemented in June 2016.

Some interesting statistics to come from the report are as follows:

  • There have been improvements in the standard of audit committee reports, with 72% of the FTSE 350 giving detailed descriptions of the work they do, when only 65% were giving such descriptions in 2014;
  • Audit retendering has improved with 46 of the FTSE 350 putting their external audit engagement out to tender this reporting season, which is up from 27 in the previous year;
  • There was an increase in shareholder voting activities at company meetings this year, with a 73% voter turnout in the UK compared with an average turnout of 67% across Europe.

It is thought that the Code will not receive any substantial revision within the next three years save perhaps for minor revisions following implementation of the ARD, and it has been suggested that it would be appropriate for the Code to be revised once every four years, except in the event of exceptional market developments.   

Throughout the course of this year, the FRC will be carrying out, amongst other things, its market-led review of how boards can most effectively establish company culture and practices that embed good corporate behaviour, with a focus firmly on corporate culture. A further report is expected in summer 2016 which publishes the FRC’s findings on understanding the roles of boards in shaping and embedding a desired culture.

Need advice or wish to talk to us?

If you would like to discuss any matters about corporate governance please contact:

Jayne Croft

Solicitor, Corporate
Tel: 0151 600 3012

Lessons from the courts: Can an email vary an agreement?

Thursday 28th April 2016

Corporate Matters - Issue 13

The simple answer is yes, even if the agreement requires any variation to be made in writing. In this day and age email can be regarded as writing as was confirmed in the case of C & S Associates UK Limited v Enterprise Insurance Company plc

In this case the Court found that whilst the agreement in question protected against verbal exchanges from amending the agreement, as the agreement did not require any changes e.g. to be made on paper or signed on the same document an exchange of emails between the parties involved was sufficient.

In light of this we would recommend caution in email correspondence to avoid inadvertent amendments to what may have been carefully crafted and negotiated agreements.

Need advice or wish to talk to us?
If you would like to discuss any matters regarding agreements or any other corporate issues please contact: 
Partner, Corporate
Tel: 0151 600 3106


When might the beneficiary of a trust exercise sufficient control over a company or LLP and therefore be subject to the persons with significant control disclosure requirements?

Thursday 28th April 2016

Corporate Matters - Issue 7

An individual has significant control over a company or LLP if one of the five specified conditions are satisfied (as explained in Issue 7). The fifth specified condition requires a person to have the right to “significant influence or control” over the activities of a trust which meets any of the other specified conditions in relation to the company or LLP.

There is guidance specific to the fifth specified condition which is relevant when a trust has significant control over a company or LLP. The draft explains that a person has the right to exercise “significant influence or control” over a trust or firm if that person has the right to direct or influence the running of the activities of the trust, for example:

  1. An absolute power to appoint or remove any of the trustees;
  2. A right to direct the distribution of funds or assets;
  3. A right to direct investment decisions of the trust;
  4. A power to amend the trust deed;
  5. A power to revoke the trust.

In such circumstances that person may be required to be named on the persons with significant control (PSC) register of the company or LLP.

You can read more about the PSC regime in our overview here.

Need advice or wish to talk to us?

If you would like to discuss any matters about beneficiaries and trusts or the PSC regime please contact either:

Adrian Rogers

Partner, Corporate
Tel: 0151 600 3127


William Bayly
Trainee Solicitor, Corporate
Tel: 0161 836 8896